Interior IG to scrutinize Zinke’s beer-making plans

The Interior Department IG's office announced in late July that it is investigating Secretary Ryan Zinke’s dealings with David Lesar, a purview that ethics specialists say will include questions about the brewery. | Andrew Caballero-Reynolds/AFP/Getty Images

WHITEFISH, Mont. — Interior Secretary Ryan Zinke made no secret of his dream of opening a microbrewery in his hometown of Whitefish.

Now, the department’s inspector general will be asking whether he colluded to have the chairman of Halliburton, one of the leading companies with business before the department, build him one.

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In Whitefish, brewers and city officials told POLITICO that Zinke has long sought to build a microbrewery of his own, a project that over six years led him to submit plans to the City Council, discuss the move with other business leaders and personally join in a review process to change local zoning laws to make them more hospitable to such a business.

Meanwhile, a planned development in Whitefish backed by David Lesar, the chairman of Halliburton — the nation’s largest oil services company, which would be one of the biggest winners in the Interior Department’s drive to roll back regulations — includes plans for just such a microbrewery.

The Interior Department IG's office announced in late July that it is investigating Zinke’s dealings with Lesar, a purview that ethics specialists say will include questions about the brewery. Ethics rules bar officials from using their official contacts to set up “nests” for their post-government lives, and the microbrewery was a focus of both the ethics watchdogs and the House Democrats who requested the investigation after POLITICO first reported on Zinke’s links to Lesar.

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Moreover, there is evidence that the microbrewery in the plans for the Lesar-backed development is the same as the one Zinke has planned since at least 2012.

The Whitefish city planner told POLITICO earlier this year that the developers of the Lesar-backed project told him the microbrewery was intended for Zinke. A plan for the development submitted to the city by Zinke’s wife, Lola — who agreed to use land controlled by a Zinke-created foundation to build a parking lot for the development — included a hand-drawn separation of land for the proposed brewery project.

But Zinke, in his first statement addressing the brewery issue, said: “Neither myself or my wife were involved in the city's approval of the development that included among other facilities, a microbrewery on the developer's property adjacent to the proposed parking lot. Neither my wife or I are involved with the building or operation of any planned microbrewery. Any suggestion to the contrary is absurd.”

In a later text, he added: “At this point in my life, I am more interested in sampling hand crafted beers rather than making them.”

The project’s lead developer, Casey Malmquist, told POLITICO earlier this year that once the project is fully permitted, “Ryan Zinke or anyone else” could make a proposal to operate a brewery.

Nonetheless, POLITICO has reported that before the foundation offered its land for a parking lot, Zinke reviewed plans for the proposed development and met with both Malmquist and Lesar in his Interior Department office, and later joined them for dinner to discuss the development, according to a participant in the meeting. Zinke continues to maintain that he was not involved in the foundation’s decision-making.

“My wife signed a letter of intent to work with the developer to share a parking lot located on park property for improved access to the community,” he said in his most recent statement. “No formal agreement [has] been even proposed much less negotiated.”

While the Zinke-led foundation’s offer of the parking lot has raised serious ethical questions, prompting the inspector general’s investigation, those who are familiar with the controversy say the IG must also zero in on whether Zinke was involved in discussions about the microbrewery, a potentially flagrant violation of ethical rules.

Rep. Jared Huffman, a California Democrat and member of the House Natural Resources Committee, which oversees the Interior Department, said the brewery adds “another layer to the conflict.”

“The relationship between Secretary Zinke and Halliburton Chairman Dave Lesar should set off alarms bells [cq],” Huffman added. “The secretary of the Interior and his family stand to personally benefit from a land deal funded by the chairman of Halliburton, a company with literally billions of dollars of business on the line when Secretary Zinke makes decisions about where, and how, oil drilling is permitted in this country. In any normal administration — and if Congress were capable of conducting oversight — this outrageous level of self-dealing and cronyism would be a national scandal.”

One example where Interior’s decision would impact Halliburton’s business is the department’s December 2017 rollback of Obama-era rules on hydraulic fracturing. The revision would reduce the costs for companies such as Halliburton to frack a well on public land by an average of nearly $10,000 per well, according to a department analysis late last year.

Fresh interviews by POLITICO this summer suggest that shortly after that rule went into effect, Montana brewery owners began hearing talk that a new brewery could be included in the Lesar-backed development, and that Zinke could be attached to it.

Both Graham Hart, owner of the Bonsai Brewing Project in Whitefish, and Lindsay Mills, a Whitefish resident and director of marketing and events at Kalispell Brewing Co. in the nearby city of Kalispell, said they heard talk in the brewing world about the microbrewery at the Lesar-backed development and of Zinke being potentially involved in it.

“I think it’s the same one, yeah,” said Mills, suggesting that the microbrewery in the Lesar-backed development is simply the latest iteration of the brewery that Zinke first proposed in September 2012 on a piece of residential property that he and his wife own beside the former freight yard on which Lesar and Malmquist are planning their project. Zinke, a former Navy SEAL, had named the planned brewery and the company they started that owns the residential property“Double Tap,” a SEAL term for two gunshots.

At the time, Zinke was a state senator who earlier that year had lost a primary race to become Montana’s lieutenant governor. He asked Whitefish city government to approve a zoning change that would allow him to convert the residential property into a microbrewery.

Montana’s independent brewing scene was booming alongside the state’s tourism and agriculture businesses. The trend would continue to the present — Montana now has 79 microbreweries, more than double the number from 2012 and second only to Vermont in breweries per capita, according to the Bureau of Labor Statistics.

Zinke and other Montana state senators passed bills to encourage the growth, including one that allowed breweries to increase how many barrels they could produce and sell on their own premises. Zinke himself introduced a bill in the Montana Legislature in 2011 that would have allowed such establishments to stay open until 10 p.m., two hours later than what existing law allowed. The bill died in committee.

At least some members of the area’s brewing scene assumed after Zinke lost the primary in June 2012 that he would focus his attention on converting his residential property to a brewpub, said Hart, the owner of Bonsai Brewing Project and a former neighbor of Zinke’s.

“He has the house on that property; it’s dilapidated, but he’s got this great property,” Hart said. “I remember when he tried to do that first one, he was campaigning. It didn’t work out, and everyone figured he was just trying to find something to do.”

Zinke had been a fixture in the local bar and brewery scene for years, Hart said. Whitefish had one microbrewery as of 2012 — the Great Northern Brewing Co. — but Zinke and others thought the town could fit one more given Whitefish’s growing tourism trade.

“I’ve seen him at breweries all the time,” said Hart, who later opened what became the city’s second microbrewery. “I know he’s super into craft beer.

“I really wanted to be the second microbrewery in Whitefish, and I’m sure he did, too,” Hart said.

But Zinke’s first efforts failed after the City Council declined to approve the zoning change necessary to turn his residential property into a brewpub. The publicly available version of the Council’s review of the project contains sentences finding the brewery would not fit the neighborhood — but those sentences are crossed out and replaced with sentences suggesting the opposite. City officials did not return inquiries on why the edits were made.

Zinke made a second attempt at converting his property into a brewery the following year. At that time, coming off his failed lieutenant governor run, Zinke joined a City Council committee charged with creating a plan to develop a commercial corridor along one of Whitefish’s main stretches of road.

Zinke remained on the committee even after winning a congressional seat in 2014. At a May 4, 2015, meeting, he told the panel he “would like to continue his plans for a micro-brewery ... knowing it will be subject to regulations and codes in place; i.e. the Whitefish Noise Ordinance so that they are not a disturbance to neighbors,” according to the meeting minutes.

His efforts again failed as he clashed with residents on and off the committee who worried that a brewery on the property would create late-night noise and fill up nearby parking in the residential area, said Whitefish City Council member Frank Sweeney.

“We started the master plan and he used that as a way” to push for his brewery, Sweeney said in an interview. “He began to treat the process and those involved in what I considered a somewhat condescending manner.”

The site currently being considered for a brewery is adjacent to land belonging to the Great Northern Veterans Peace Park Foundation, a nonprofit Zinke started in 2007 and ran for a decade before his wife took his place as foundation president last year. The foundation’s other directors are Zinke’s children and a real estate developer.

The large freight railroad BNSF donated the land to Zinke for use as a park while he was state senator. Though the land is little-used and largely unchanged from the time of its donation, Zinke, in his latest statement, described it as a gift to the community.

“The park provides a safe sledding and skating venue for kids and a community open space at no charge,” he wrote in his latest statement. “My family alone grooms the hills, conducts the maintenance and pays for the snow plowing. We have also supported education projects when we can afford to. A great story of giving back to a community I love.”

Ethics specialists say the foundation’s offer to provide a parking lot for the Lesar-backed development could stand to benefit the Zinkes even if there is no established link between the couple and the proposed microbrewery. That’s because the development would increase the value of the abutting property the couple owns, two parcels of land that include the rejected site of their initial proposal for a microbrewery. Across the street from those sites is a house that the couple converted into a bed-and-breakfast called the Snow Frog Inn.

The Zinkes own the bed-and-breakfast through another limited liability corporation called Continental Divide LLC. They started an earlier version of that corporation — Continental Divide Inns LLC — in 2005, when Ryan and Lola Zinke joined with Dr. Joel Bernstein, a family friend from California, according to the firm’s articles of incorporation.

Bernstein would be found guilty in 2013 of defrauding Medicare for four years leading to mid-2011. There was no evidence that Zinke or Continental Divide had any part in the fraud, Melanie Pierson, the Justice Department lawyer who prosecuted the case, told POLITICO. In 2013, Zinke filed paperwork disassociating Bernstein from the firm. Bernstein died in 2014.

Now, the Zinkes control the properties through the Continental Divide and Double Tap LLCs. Lola Zinke also controls the foundation overseeing the peace park. Together, the properties frame the Lesar-backed development.

The inspector general’s investigation is widely expected to cover all aspects of the dealings between the Zinkes and the Lesar-backed development, though Nancy DiPaolo, the IG’s director of external affairs, said the office does not comment on ongoing investigations.

In Whitefish, the notion that the planned microbrewery next to the Zinkes’ park and land could be the outcome of Zinke’s yearslong efforts to develop a business presence in the town has been talked about for months among local brewers, said Mills, the director of marketing and events at Kalispell Brewing Co.

While there was debate as to whether Whitefish — a town of 6,000 full-time residents — could accommodate a third microbrewery, Mills said, Zinke would be welcome to try.